U.S.: Fifth Circuit Gives DOL 30 Days to Reconsider ESG Rule for ERISA Fiduciaries
On April 28, 2025, the U.S. Court of Appeals for the Fifth Circuit granted the U.S. Department of Labor (“DOL”) a 30-day stay of proceedings to allow the DOL to reconsider the challenged Rule on Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (the “Rule”). In its order, the Fifth Circuit declined the DOL’s request for an indefinite pause, stating “[t]he court will not permit an open-ended abeyance.”
The DOL’s Motion for Abeyance argued that “the Department’s reconsideration and potential rescission of the challenged rule could obviate the need for further litigation.” The Fifth Circuit’s limited abeyance puts pressure on the DOL to decide whether to maintain or rescind the Rule by May 28, 2025.
The Biden-era Rule, which took effect on January 30, 2023, permits fiduciaries under ERISA to consider ESG factors when deciding between investment options that are equally financially beneficial. A coalition of Republican attorneys general challenged the Rule in 2023, alleging violations of ERISA. Although the District Court initially upheld the Rule, the Fifth Circuit vacated and remanded the issue after the Supreme Court overturned the “Chevron doctrine” in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024). The District Court again upheld the Rule in February 2025, and that decision is now before the Fifth Circuit.
Links:
Fifth Circuit Order
DOL Motion
U.S.: SEC Approves First Sustainability-Focused Stock Exchange
On April 14, 2025, the Green Impact Exchange (“GIX”), a sustainability-focused stock market, announced that the U.S. Securities and Exchange Commission (“SEC”) had approved its application to become a national securities exchange, making it the first registered exchange in the United States to be explicitly focused on climate and sustainability.
The SEC’s approval comes almost one year following GIX’s initial application, which was filed with the SEC on May 9, 2024. The approval is particularly notable in the context of the SEC’s recent shift away from climate finance, exemplified by its recent decision to end its legal defense of the SEC’s climate-related disclosure rules (discussed in our April 18 update).
Trading on the GIX is expected to begin by early 2026. Consistent with its mission to act as a marketplace for green-focused investors and companies, GIX is expected to adopt stringent sustainability-focused reporting guidelines and listing standards, including by requiring listed companies to make public commitments to sustainable business practices. GIX intends to permit dual listings, allowing shares of companies listed on other exchanges to also be traded on its exchange.
Links:
Press Release (Application)
Press Release (Approval)
National Securities Exchanges
U.S.: EPA Publishes List of Power Plants to Be Temporarily Exempted from Pollution Regulations
On April 14, 2025, the U.S. Environmental Protection Agency (“EPA”) published a list of nearly 70 coal-fired power plants operated by 47 companies that will be temporarily exempted from compliance with rules mandating the reduction of mercury, arsenic and other toxic emissions (the “MATS Rules”). Adopted by the Biden administration, these rules became effective on July 8, 2024 and require compliance by July 8, 2027. The temporary exception permits the listed power plants to remain out of compliance with the MATS Rules for an additional two years.
The publication of the list follows an April 8 proclamation by President Donald J. Trump in which he ordered imminent regulatory relief for coal-fired power plants. It also comes amidst ongoing efforts by state and federal actors to prevent the MATS Rules from taking effect. Most prominently, a coalition of state attorneys general and industry groups filed an application for an emergency stay of the MATS Rules. In October 2024, the U.S. Supreme Court rejected the application for an emergency stay of the MATS Rules, but the litigation remains ongoing.
Links:
EPA Announcement
Presidential Proclamation
MATS Rule
EU: Commission Opens Consultation on Delegated Regulation to Clarify Scope of Deforestation Regulation
On April 15, 2025, the European Commission (the “Commission”) opened a consultation on whether to introduce a new Delegated Regulation clarifying the scope of the European Union’s Deforestation-free Products Regulation (the “Deforestation Regulation”).
The Deforestation Regulation is scheduled to go into effect for large and medium companies (namely companies that, on their balance sheet dates, exceed at least two of the following three criteria: balance sheet total of EUR 20 million, net turnover of EUR 40 million, and average number of employees of 250) on December 30, 2025. The Deforestation Regulation requires companies in scope to undertake extensive due diligence to ensure that certain commodities and related products, such as cattle and timber, which are admitted and traded in the EU, are not linked to deforestation, forest degradation, or violations of indigenous peoples’ rights. The proposed Delegated Regulation would amend Annex I of the Deforestation Regulation to clarify that certain products, such as waste, second-hand and used products, together with packing materials clearly suitable for multiple uses and used to protect other products, are not covered by the Deforestation Regulation.
The consultation closes on May 13, 2025. Alongside the consultation, the Commission has also published updated Guidance and FAQs on the Deforestation Regulation which, among other issues, clarifies certain definitions such as “placing on the market” of covered products.
Please see our separate Debevoise in Depth for further information on the Deforestation Regulation.
Links:
Deforestation Regulation
European Commission Consultation
Updated Guidance Document
Updated FAQs
Global: Net-Zero Banking Alliance Votes in Favor of Revised Climate Guidance Amid Member Departures
On April 15, 2025, the Net-Zero Banking Alliance (the “NZBA”) adopted revised guidance for climate target setting for member banks, lowering its target from a strict 1.5°C pathway to a goal of “well below 2°C, striving for 1.5°C.” The update is the result of a year-long strategic review which sought to gather input from member banks on the future of the alliance. The update follows the departures of a number of U.S. and other banks from the NZBA. The revised guidance was approved by more than 90% of NZBA’s 120+ member institutions.
The new guidance states that banks’ “targets should align with the goals of the Paris Agreement […] be science-based and support the global transition to a net-zero economy.” While NZBA leadership noted that 1.5°C remains the “guiding star” for many members, the revised framework allows for flexibility in how banks align with the Paris goals. It recommends that banks “independently and individually” set and disclose targets, report financed emissions annually and review targets at least every five years.
Links:
Press Release
Guidance
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